Renewables developers win big discount on public lands

This piece was originally published by Independent Women’s Forum on April 12, 2024. See the original here:

In June 2023, I covered a Department of the Interior (DOI) rule that “proposed to slash solar and wind developer fees by 80% on federal public lands” overseen by the Bureau of Land Management (BLM) for IWF. The DOI finalized its steep discount for renewable energy developers [on April 11, 2024], in the latest example of the federal government tipping the scales for its preferred solution to energy generation.

The Federal Land Policy and Management Act (FLPMA) of 1976 established clear guidelines requiring right-of-way holders to pay the fair market value for leased public lands. However, since 2020, there have been exceptions made for renewables developers. The BLM is responsible for  arriving at a price through a series of nebulous factors such as “economic hardship” and whether a reduced fee is needed to “promote the greatest use of wind and solar energy resources.”

The new rule formalizes and deepens rate cuts that began in 2022 guidance. As I previously explained about the proposed rule:

Wind and solar projects pay two annual fees to BLM to use public lands: acreage fees and capacity fees, which are due before the lease is issued and when energy generation begins, respectively. The proposed rule would slash a major component of capacity fees, which are based on the wholesale price of electricity and the generating capacity of a project, by 80%.

If the capacity fee is greater than the acreage rent, the developer is only required to pay the capacity fee—not both. The discounts will remain in effect until 2035, at which point they are supposed to ratchet downward to a 20% discount in 2038. (Milton Friedman would be quick to remind us that “nothing is so permanent as a temporary government program.” Check back in 2035, folks.)

Taxpayers are being shortchanged by being deprived of the fair market value for land rentals. What’s worse is that renewable energy projects already rely heavily on subsidies and tax breaks to survive. Furthermore, special treatment will not overcome grid connection challenges and the substantial land requirements of wind and solar compared to coal and natural gas-fired plants.

It is clear that the federal government is picking winners and losers, rather than promoting a fair selection process for land usage. While renewable energy developers enjoy reduced fees, fossil fuel developers are staring down the barrel of increasing royalties and a proposed fee on “excess” methane emissions.

The BLM press release also touts that it has already exceeded its mandate to permit 25 gigawatts of renewable energy by 2025: “The Department has now permitted nearly 29 gigawatts of clean energy – enough to power more than 12 million homes across the country.” 

With the DOI already surpassing the administration’s permitting goals, is it really necessary to concretize drastic fee reductions?

While wind and solar have their roles in an all-of-the-above national energy strategy, their promotion should not come at the expense of fairness, transparency, and fiscal responsibility.